Project Management in Construction - Procurement Tips

When I started my Project Management career, I was surprised that the busiest phase was during Procurement. Gathering everything you need ahead of time is critical in construction, but especially so in the Philippines as we are highly dependent on importation. Many types of furniture, materials, and equipment that are essential for construction and fit-out are not locally manufactured. In our field they are termed as long lead items as they take months to customize, fabricate, ship, go through customs, and finally be delivered to site. In companies I’ve worked with before, you can tell that the project is at the procurement stage when the PM and team are staying up late in the office because they can’t afford to miss a day, otherwise, the project will slide.

Clients also vary in their approach - I had one with a robust procurement process to abide by, while I also experienced a client that just entered the Philippine market without an established process but instead chose to trust me on vendor selection. I’ve worked on a variety of projects that fall at different points within this spectrum, and I’ve summarized the common points as best as I can below. For reference, items with and asterisk (*) are typically required activities by most multinational companies.

Activities:

1. Collate Letters of Intent to Participate from your roster of trusted suppliers

As a Project Management Company, you should have a solid list of reputable vendors that you can invite to bid on behalf of your client. To say the least, they should be vendors that have repeatedly delivered successful projects, are collaborative, and without any unethical entanglements. Background checks can be formalized through a thorough vendor accreditation program to ensure fairness. Most multinational companies will require at least 3 bidders, and if there are any special requirements from your client, you should be able to evaluate it too.

Tip #1: Determine the Right Procurement Strategy. Choosing an approach depends on the scale, time frame, market and client design guidelines of a project. You can choose a Traditional Design-Bid-Build; Design-Build Turnkey; or Hybrid approach.

2. Issuance of ‘Request for Proposal’ (RFP) *

When you ask for cost proposals from bidding suppliers, you need to start them all on the same page by providing the same information/documents as follows:

a. Details about the Project *

b. Draft Contract * - which will inform them about payment terms, client requirements, liability clauses if there are any, among others

c. Plans and Specifications - for Contractors and Suppliers

Tip #2: Prepare an objective Evaluation Criteria that will be signed-off formally by the client. The criteria can include but not limited to - company capability, proposed resources, HSE protocols and technology.

3. Pre-Bid Meeting / Joint Site Visit

All bidders meet and inspect the site simultaneously. Any questions that arise at this stage will be formally answered by the project management team and cascaded to all the bidders so they will have a uniform understanding of the project requirements.

4. Bid Submission (Physical or Online) *

Set a reasonable deadline for your bidders to submit their proposal. Timeliness here could be a determinant of their potential dedication to the project.

Tip # 3: Align with your client. Make sure you and the client have agreed on the bid opening policy, whether e-bid submission or hard copies. Ideally, you and the client open the bids together at the same time. In the event there is a request for ‘Extension of Time’ (EOT), the rule of thumb is to grant it only if the majority requested, and this should be coordinated with the client.

5. Bid Review and Leveling *

One of the most important procurement tasks is to tabulate all your bids and look out for outliers. Unusual numbers can signify discrepancies in the specs, misunderstandings in the scope, or miscalculations that bidders can still double check to create the best possible proposal for your client. As a project manager, it is your duty to guide the bidders to a uniform understanding, but without giving away unfair advantage to any one.

Tip # 4: Compare bids ‘apples-to-apples’. In projects wherein you have Quantity Surveyors (QS), they will be able to provide their estimates. But for projects where clients don’t require QS, you should tabulate the bids and compare them only when they are expressed in identical units of measurement.

6. Bid Clarification Meeting

A meeting is set with each bidder to clarify their bids.

Tip # 5: Most Construction Agreements are Lump-sum, meaning whether the Bill of Quantities are correct or not, contractors should abide by the ‘Scope of Works (SOW) in the contract, which is reflected in the plans and specifications. Make sure to mention this to the contractors/ suppliers during pre-bid and remind them at this stage.

7. Bid Resubmission

A fair project management process allows bidders to adjust their proposals accordingly with the clarifications made. At this point, resubmitted bids should truly be comparable apples-to-apples and there will be a clear frontrunner.

8. Bid Interview together with Client

The shortlisted bidder/s will present their proposal to PM, Client and other stakeholders to assess their capability, approach and know resources proposed to the project.

Tip # 6: Collaborate with Client. Post Interview alignment is not commonly done but having this conversation will help faster approval of Project Manager’s Bid Report and Recommendation.

9. Bid Report and Recommendation *

This is the project manager’s assessment and recommendation identifying the best choice based on the evaluation criteria.

10. Client Comments/ Approvals *

The client may have accompanying notes with their approval which must be taken into account during project execution.

11. Letter of Award (LOA) or Notice to Proceed (NTP) *

Project managers are authorized to issue an official LOA or NTP to the awarded suppliers.

Tip # 7: Notice of Award to commence preparatory works. LOA or NTP is issued immediately in order for consultants/ contractors/ suppliers to commence work while a Contract is being executed (Contracts and POs often take time to execute).

12. Contract and/or Purchase Order

These formal documents will be the basis of future billings and even disputes, so it is necessary for all parties to agree by signing off.

The 12 steps might seem daunting, but they naturally flow. These tools and templates - Procurement Strategy, Tender Event Schedule, Evaluation Criteria Matrix- might also help you in your journey.

Based on my experiences, I know that the Procurement Phase is crucial for success. Project Managers should abide by their client’s procurement policies in selecting the right partners. This phase also poses a lot of temptations. Last tip I want to give is always remember, REPUTATION is a lifetime to build and a moment to DESTROY.